Any business that is experiencing financial problems needs to eventually decide about its future. In such cases, one of the options available for business owners is to file for a small business bankruptcy. After all, bankruptcy is considered to be the right option when your business is dealing with financial problems.
You may have come across the term small business bankruptcy, though few people understand it. Remember that bankruptcy is not always an easy process, so it’s crucial to know everything before proceeding with this process. This post explains about small business bankruptcy.
Understanding small business bankruptcy
You should remember that bankruptcy refers to a legal process that can allow your business to minimize or even remove debts and sell off assets. In this way, the creditors of your business can get their fair shares. This happens to be the legal way you can close your business without paying off all the debts. Therefore, you can decide for your business to file for bankruptcy, especially when you fail to pay the bills. Quite often, most of the operations of a business can stop when it’s considered to be bankrupt.
When you file for bankruptcy, it means the operations of your business can stop at the date of bankruptcy. However, for small businesses, bankruptcy needs to be the last decision for dealing with financial problems. It can only be the right option depending on the situation of your business. Therefore, if you decide to file for small business bankruptcy, it’s a good idea to fully understand the business situation.
It’s also worth noting that a business can either be a partnership or sole proprietorship. So the owners of these businesses are the ones who can become bankrupt. It’s because there is no legal difference between personal assets and business assets when it comes to these business structures. Ideally, a business bankruptcy for these entities can mean a personal bankruptcy for the business owners.
On the other hand, for incorporated businesses, they can be legally separate entities. Simply put, it means both the debts and assets are the responsibility of the business. Therefore, incorporated small businesses that can’t meet their financial responsibilities can file for business bankruptcy.
Filing for small business bankruptcy
When you decide to file for small business bankruptcy, then it’s a good idea to speak with the Sasser Law Firm. Here, you can find an attorney with experience handling bankruptcy cases.
When you meet with a bankruptcy attorney, they can review all the financial records of your small business. An attorney can then offer you the available options that they can handle. This is important because you tend to get all the information that can help you to make an informed decision.
As explained earlier, when your business is experiencing financial problems, it’s easy to think that bankruptcy can be the only available option. But this is usually not the case. You see, there are many other options for small businesses, though this can depend on the financial situation of your business.
An experienced bankruptcy attorney can tell you these options for small businesses. Many attorneys provide the initial consultation free of charge. Therefore, this allows them to review the financial situation of your business and even offer you the information on the other available options.
When it comes to these available options, you can choose a proposal to creditors. This option is when you arrange for your business to pay lower monthly payments to its creditors over time. You can also arrange to repay the creditors just a part of what your business owes its creditors. This is a good option as it allows your business to keep on operating and avoid bankruptcy. You can do this by ensuring that your creditors get at least a portion of what you owe them. Therefore, an attorney can discuss with you this option so that you can avoid filing for a business bankruptcy.
Keep in mind that it always comes down to the decision you make on how to proceed. An attorney cannot force you to make a decision or even try to convince you to take any option.
Hence, if you think that it’s right to have small business bankruptcy, then your attorney can help you do all the paperwork. They can even tell your creditors that you intend to file for bankruptcy.
The attorney can also handle all your assets and ensure that they dispose or sell them. This is necessary so that your creditors can get their share. Remember that the specific process can depend on the particular situation of your business.
The bankruptcy options
The good thing about bankruptcy is that it can help your small business to still operate or close down efficiently. However, it’s not every business that can file for bankruptcy or even benefit from it.
There is chapter 11 bankruptcy that allows small businesses with enough cash flow to keep on operating while making lower monthly payments to their creditors. On the other hand, businesses without cash flow may prefer to hire lawyers such as Chapter 7 Bankruptcy Lawyers Milwaukee and use chapter 7 bankruptcy so that they can close transparently and efficiently.
Many businesses that have a sole proprietor tend to use Chapter 7 after closing the business. This option can be ideal because Chapter 7 can remove both personal and qualifying business debts. You don’t need to pay the creditors of your business, and it can take at least three months to complete.
However, if you decide to keep on operating your business, then it’s a good idea to file for Chapter 13 bankruptcy. This option allows you to continue running your business, but it needs to have enough cash flow so that it can make the required monthly repayments.
With Chapter 13 bankruptcy, you can keep the assets of your business, so it tends to work better if you desire to have more assets to operate your business. Remember that you need to pay creditors through the repayment plan. Besides this, you have to prove that there is enough income that can support the bankruptcy case.
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